Details on Actions by the HHS Medicaid Commission and Expected Actions in Congress

August 22, 2005

Higher Co-payments for Prescription Drugs Recommended

As part of its final recommendations, the Commission closely followed a set of proposals put forward by the National Governors Association (NGA) from earlier this summer. The NGA proposal would allow states much greater flexibility to charge Medicaid recipients higher co-payments. In particular, the proposal would reverse decades of state and federal Medicaid policy that requires providers (including doctors and retail pharmacists) to provide services and prescriptions if a beneficiary is unable to make the required "nominal" co-payment. Specifically, this would allow states to impose requirements that medications not be dispensed to Medicaid recipients who are unable to meet even minimal co-payment requirements.

The higher co-payment proposal endorsed by the Commission would be restricted to prescription drugs. Current estimates are that it would reduce Medicaid spending by $2 billion over the next 5 years. However, most of those savings would come from prescriptions that would not be filled (decreased utilization), rather than actual revenue generated by higher co-payments. In other words, the main impact of the proposal would be to deter the most disabled and vulnerable beneficiaries from accessing critical medical treatment.

The Commission's proposal closely follows the NGA recommendation to exempt Medicaid recipients below 100% of the federal poverty level from higher co-pays. While most SSI beneficiaries are below this 100% level, in many states where SSI is supplemented through a state program, mandatory SSI recipients would fall above this threshold.

Under the option endorsed by the Commission, states would be able to increase co-pays on non-preferred drugs beyond "nominal" amounts when a preferred drug is available, to "encourage beneficiaries to fill the least costly effective prescription for treatment." However, the Commission makes no accommodation for specific therapeutic categories such as atypical anti-psychotic medications where numerous clinical studies have demonstrated that medications are not clinically interchangeable. Under the Commission's proposal, states would be given broad authority to waive co-pays in cases of true hardship or where failure to take a preferred drug might cause serious adverse effects.

NAMI is especially grateful to Commission member Gwen Gillenwater of the American Association of People With Disabilities who offered an amendment to strike to proposal for higher co-payments on prescriptions. Unfortunately, the amendment failed 1-12.

This proposal by the Commission is an enormous step backwards and represents a direct threat to access to treatment for Medicaid beneficiaries. NAMI will be working vigorously to ensure that this proposal for higher co-payments in prescription drugs is rejected by Congress.

One bright spot in the Medicaid Commission's deliberations was rejection of a proposal from the Bush Administration to significantly narrow the definition of both rehabilitation and targeted case management services under Medicaid. Currently, states are able to finance a range of intensive case management and assertive community treatment (ACT) programs through Medicaid through various options, including the so-called "Rehab Option." In many states, Medicaid serves as a critical source of funding for these services that are typically delivered by CMHCs and state and county mental health authorities. Programs such as a ACT are essential to treatment adherence and recovery for many consumers struggling with the most severe and debilitating symptoms of mental illness.

The proposal put forward by the Bush Administration – detailed in NAMI's testimony to the Commission (PDF)– would narrow both targeted case management and rehabilitation services and likely exclude ACT programs. Current estimates are that it reduce future Medicaid expenditures by $2 billion over the next 5 years.

Specifically, it would narrow the definition of both case-management and rehab services to clarify that covered services are those that "assist individuals in obtaining necessary medical, social, education, and other services," so long as they are:

1. distinct from such other services;

2. paid for through a specific fee schedule and not provided for free;

3. used to achieve specific, measurable outcomes for specific individuals, and

4. not provided as an intrinsic element of any other program.

The concern here is that in many states, ACT programs are integrated into the larger publicly funded mental health service system at the state and local level. Further, while ACT is an evidence-based service model built on individualized treatment plans, it is designed to achieve long-term outcomes related to an individual's recovery, not necessarily an immediate increase in functioning or relief of specific symptoms. Most importantly, ACT programs are not typically billed through a single fee schedule or paid for by consumers through a single fee schedule. In other words, whether intentionally or not, the Administration's proposal poses an enormous threat to Medicaid financing of ACT programs across the country.

Finally, it is important to note that the Administration's proposal would reduce the federal matching rate for case management and targeted case management to 50 percent (poorer states taking the worst hit). This TCM proposal was floated by the Administration -- and rejected -- last year in negotiations over the passage of the Family Opportunity Act and Money Follows the Person. While the Administration insists that this change would harm no one, disability advocates disagree – particularly in relation to individuals with mental illness who are living in states with a Medicaid matching rate higher than 50% that use Medicaid to finance ACT programs.

Expanded Use of Supplemental Rebates and Restricted Medication Access Endorsed

The Commission endorsed a proposal to extend existing supplemental rebates imposed by state Medicaid agencies on drug manufacturers to Medicaid managed care plans. Under existing rules, states are allowed to assess drug makers a supplemental rebate in order to ensure that a manufacturer's products are available through Medicaid on a preferred basis, i.e. without being subject to prior authorization, step therapy or at a higher tiered co-payment. Drug makers that do not meet the highest rebate level generally find their products either not included on a state's Medicaid formulary, or subject to a prior authorization or "fail first" requirement.

Extending existing supplemental rebates to Medicaid managed care plans would impact the 12 million Medicaid beneficiaries who now receive their medications from these plans (most on a mandatory basis). Further, while the Commission estimates that this could save the federal government as much as $2.2 billion over 5 years, the proposal would be an enormous windfall for Medicaid managed care plans that would be imposing restrictions on access to Medicaid recipients with disabilities and chronic illnesses.

NAMI is especially concerned about the impact of this proposal on Medicaid recipients living with severe mental illnesses. The adverse impact of supplemental rebates on Medicaid recipients is enormous. In states across the nation, imposition of these rebate programs has been associated with proliferation of prior authorization and "fail first" requirements being imposed on atypical anti-psychotic medications. NAMI is extremely concerned about the Commission's proposal and will work to defeat it in Congress in September.

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